Sunday, March 25, 2012

China’s train wreck

China's $300 billion high speed rail project is a bankrupt financial train wreck but praised as the model for the US.

For the past eight years, Liu Zhijun was one of the most influential people in China. As minister of railways, Liu ran China’s $300 billion high-speed rail project. U.S., European and Japanese contractors jostled for a piece of the business while foreign journalists gushed over China’s latest high-tech marvel.
Today, Liu Zhijun is ruined, and his high-speed rail project is in trouble. On Feb. 25, he was fired for “severe violations of discipline” — code for embezzling tens of millions of dollars. Seems his ministry has run up $271 billion in debt — roughly five times the level that bankrupted General Motors. But ticket sales can’t cover debt service that will total $27.7 billion in 2011 alone. Safety concerns also are cropping up....Liu’s legacy, in short, is a system that could drain China’s economic resources for years. So much for the grand project that Thomas Friedman of the New York Times likened to a “moon shot” and that President Obama held up as a model for the United States.